Germany must act NOW to save the euro, Cameron to warn as Obama slams Europe's dithering

David Cameron is planning to fly to Berlin next week amid growing British anger at Germany’s refusal to bring an end to the euro crisis.

Senior figures in Downing Street are furious that Chancellor Angela Merkel is failing to back the single currency with hard cash and fear she won’t act ‘until we’re living in apocalypse now’.

Mr Cameron declared yesterday there was a ‘big question mark over the future of the eurozone’ as he warned that Britain’s economy was suffering because of indecision from European leaders.

Reading the Riot Act: David Cameron will put pressure on Angela Merkel to take swift action

He spoke out as U.S. President Barack Obama called Mrs Merkel and French President Nicolas Sarkozy to complain about the failure to deliver a ‘big bazooka’ bailout fund to reassure the markets that Europe is serious about propping up the currency.

Mr Obama’s aides believe Mrs Merkel’s dithering could cost him re-election next year because Europe will drag the American economy down with it.

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Downing Street sources say Mr Cameron – stung by criticism that he is sitting on the sidelines while the euro burns – is planning a tour of European capitals that is likely to see him in Berlin on Friday.

Number 10 has not finalised the details because of the fast-moving situation.

But the Prime Minister is expected to urge Mrs Merkel to let the European Central Bank act as lender of last resort for countries in the eurozone.

The Germans are resisting that move because they believe it will fuel rampant inflation, as in the 1920s when it paved the way for Adolf Hitler.

Senior figures in the British Government believe Mrs Merkel will do what is necessary when it is ‘two minutes to midnight’. But they are openly irritated she has let the situation spin almost out of control.

Barack Obama called Mrs Merkel and French President Nicolas Sarkozy to complain about the failure to deliver a 'big bazooka' bailout fund

A Number 10 insider said: ‘She seems intent on sitting around until we’re living in apocalypse now.’

The source echoed Foreign Secretary William Hague’s view that the euro is a burning building from which no one can escape. ‘The problem is Merkel won’t do anything until the curtains are on fire and the carpets are melting,’ he said.

Another senior government source added: ‘She wants to lead, but all she’s doing at the minute is leading us all to disaster.’

Events took a turn for the worse yesterday when Klaus Regling, head of the European Financial Stability Facility, said there was little prospect of the bailout fund being as large as EU leaders have promised. Under a deal thrashed out last month, the fund is supposed to more than double in size to one trillion euros (£850billion). City experts say a fund of three trillion euros would be necessary to reassure the markets.

But Mr Regling said even the one-trillion-euro target would be missed. ‘The political turmoil we saw in the past ten days probably reduces the potential,’ he said. ‘It was always ambitious to have that number.’

Diplomats now fear it will be ‘more pea-shooter than bazooka’. Mr Cameron’s aides are frustrated that two weeks after the deal, Germany, France and the other eurozone nations have refused to provide hard cash to swell the fund.

The Prime Minister said: ‘There is real turbulence in the markets, real question marks over whether countries can deal with their debts, and a big question mark over the future of the eurozone.

‘My responsibility is to try to help bring about a solution to these problems, but above all my priority is to try to keep the British economy safe.’ He added Britain was going to face ‘a difficult time because of what is happening in the eurozone’, but said he wanted to ensure it came ‘safely through the storm’.

U.S. Treasury Secretary Timothy Geithner said Europe had to ‘move quickly’ to resolve the crisis.

''She is leading us all to disaster'

But Gilles Moec, senior European economist with Deutsche Bank, warned ‘it is already too late to avoid a recession’. He added: ‘What we can do if we have a proper response by policy makers in Europe is to avoid the replication and morphing of this minor recession into anything more sinister.’

British officials believe every day lost in the search for a solution will make the problem worse. Italy has already been sucked into the debt disaster sparked by Greece.

There are also signs that France will be the next to fall as the interest rate at which it borrows creeps inexorably upward.

Chancellor George Osborne admitted: ‘There is no doubt that growth in Britain, jobs in Britain have been hit by what is going on in the eurozone.’ The Shadow Chancellor, Ed Balls, warned Europe was heading for disaster – and blamed inaction by both Mr Cameron and the Germans.

He said: ‘It is a catastrophic week we have had. And the reason is because there is not a sense of collective leadership in the eurozone, and Europe more widely, and in the world, which we need.

‘You have got countries putting national interests before the collective interest; Germany not being willing to support Italy and other countries, the European Central Bank hamstrung.

‘The European Central Bank should be playing a much bigger role. If you have a single currency in these circumstances where contagion is spreading, the central bank must be the lender of last resort.’

Economist is sworn in as Greek Prime Minister

Greece's new technocrat prime minister Lucas Papademos was sworn in yesterday, along with a unity coalition government.

The 64-year-old is charged with pushing through tough reforms to ensure the country avoids a catastrophic default.

Mr Papademos, a former European Central Bank vice president, leads a government including ministers from three parties.

Shake on it: George Papandreou, left, with new premier Lucas Papademos

The bitter rivalry between outgoing prime minister George Papandreou’s socialists and the conservatives of Antonis Samaras is being set aside as Greek politicians struggle to put the country back on track financially and ensure it can retain its cherished position in the eurozone.

During the handover, Mr Papademos told the outgoing premier: ‘The new cooperation government will do the best it can to address the country’s problems, and I believe that with the cooperation of all – and the new government stresses this – and the unity of all, we will achieve that.’

Finance minister Evangelos Venizelos retained his post and conservatives were given the key positions of foreign affairs and defence.

Mr Papademos, a former governor of Greece’s central bank who oversaw the country’s entry into the euro, was appointed on Thursday after two weeks of political turmoil.

The economist must now ensure his government passes Greece’s latest debt deal, a £110billion agreement reached by the European Union.

He will lead the country to early elections, tentatively scheduled for February.